Cleveland’s City Council threw a life raft Monday to private developers hoping to tackle a major real estate project along the east bank of the Flats.

Council members approved a substantial financial package, including a $30 million loan, that Mayor Frank Jackson proposed last month as part of city and state efforts to revive the recession-stalled plans. A $270 million first phase is to be anchored by a new office building to house the Ernst & Young accounting firm and the Tucker Ellis & West law firm.

The city’s help, along with other public and private financing, could allow the developers — the Wolstein Group and Fairmount Properties — to complete that phase by spring 2012.

Those additional pieces, including $24 million in grants and loans from the state, are likely to be secured soon, said Steve Strnisha, a financial consultant on the project.

"All of this should be coming together in the late October, early November time frame," he said. "We’re on track to be where we want to be, in terms of being able to close by the end of the year."

The package council approved Monday includes:

A 20-year, $30 million loan at an interest rate of at least 3 percent. The city plans to borrow the money from the U.S. Department of Housing and Urban Development. The loan terms require developer Scott Wolstein and his mother, Iris Wolstein, to personally guarantee that the first phase of the project will be completed. Terms also require the developers to hire construction workers and obtain supplies for the project from local companies and to hire graduates from building trade programs at Max S. Hayes Career and Technical High School.

A new version of a financing agreement that taps property tax revenues created by the project to pay for portions of the development. The agreement, approved last week by the Cleveland Metropolitan School District, would permit portions of the tax revenues to be used for private and public improvements — not just public development, such as roads.

$25 million from the city’s Recovery Zone Facilities Bond allocation, which comes from the federal government’s recent economic stimulus program. This will not cost the city money. The government gave Cleveland the ability to convert otherwise taxable bonds for private development into tax-exempt bonds. The city will lend that to the state and to the Cleveland-Cuyahoga County Port Authority, which will issue bonds to pay for parts of the Flats project. The result: More bonds, at a lower interest rate, to fund construction.

Revisions of two existing city loans to the project, changes to reflect project delays. A $3 million loan is to be repaid in 2030 instead of 2028 at 1 percent interest. A $1.25 million loan is to be repaid in 2029 instead of 2018 but will now carry a 3 percent rate instead of zero.

Also Monday, council members signed off on plans to make way for a new state psychiatric hospital in the Midtown neighborhood. The city will purchase and clean up several parcels near Euclid Avenue and East 59th Street at a cost of more than $3.9 million. The state has committed to then buy the property from the city for $1.9 million, or $150,000 per acre.

Councilman Tony Brancatelli, who chairs the council’s Community and Economic Development Committee, said the $2 million difference is considered a grant tied to the retention of 300 jobs in Cleveland and the relocation of 200 from the suburbs.

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